Editor’s note. This article show how bipartisan trade reform is.
If President Trump has been clear on one thing, it’s that globalized trade is a raw deal for American workers.
[Jeff Spross | July 16, 2018 | The Week]
Of course, most mainstream economists and commentators do not agree, to put it mildly. They see globalized trade as a win-win for everyone, and Trump’s “America First” agenda as myopic and destructive.
But our protectionist in chief is getting at least a little sympathy from one unlikely group: progressive economists.
That sympathy is complicated, and it doesn’t often translate into support for Trump’s specific policies. But after I spoke with several economists on the left and reviewed their recent writings, it became clear to me that many of them believe Trump actually gets a decent amount right on trade.
Many progressive economists broadly agree with Trump that America’s trade relationships with other countries are a dysfunctional mess — and that they’ve done serious damage to American workers.
“It would be deeply unwise to ignore the power of [Trump’s] message,” Heather Boushey and Todd Tucker — the chief economist at the Washington Center for Equitable Growth, and a political scientist at the Roosevelt Institute, respectively —recently wrote at Vox. They pointed to evidence that the start of global trade relations with China in 2000 decimated jobs and wages for blue-collar workers here in America.
Trump has responded to this reality with massive tariffs — something some progressive economists agree with, at least in principle.
“Tariffs are sorely needed to retaliate for theft of intellectual property, state-owned enterprises, overcapacity, and other forms of unfair trade, including more than a decade of massive currency manipulation,” Robert Scott of the Economic Policy Institute (EPI) told me.
Like Trump, many progressive wonks are deeply critical of the world’s free-trading order. Economists such as Dean Baker and Kevin Gallagher paint a picture in which modern global trade throws all the power to international corporations, allowing capital to move freely about the world, while bleeding the Western working class. Law professors Ganesh Sitaraman and Timothy Meyer, who often focus on international economic law, concur.
Many of these experts sharply attack the mainstream consensus that global trade liberalization has been a win-win for everyone. Baker points out that even textbook economic models merely say that winners win from trade more than losers lose. A win-win for everyone only happens if the winners then compensate the losers. But in practice, this never happens. Without that second step, “free trade has become a weapon against labor,” Gerald Friedman, an economist at the University of Massachusetts at Amherst, told me. “This trade two-step is a sham,” Sitaraman and Meyer bluntly write.
Now, it’s certainly true that the global poor are worse off than the Western working class — and that the former group has seen its living standards sharply improve in the era of global trade. When pressed, defenders of the mainstream consensus often argue the Western working class had to be wrecked to lift up the global poor. Baker strenuously disagrees: “There is no reason these countries could not have continued on a path where domestic demand fueled growth and was funded by foreign investment flows.”
In other words, according to many on economics’ left flank, globalized trade policy really did betray American workers. And the refusal of the economic and political center to recognize this fact helped fuel Trumpism’s rise.
Few progressive economists would characterize Trump’s trade agenda as an unadulterated good. But several of them allow that a good trade policy would overlap with what Trump has done in several respects.
For instance, Scott said Trump’s steel and aluminum tariffs “are sorely needed,” and America’s industries “have been greatly harmed by rising imports and falling prices, caused by massive, state-supported excess capacity in China, Vietnam, Russia, and other countries.” He also argued that mainstream warnings vastly overstate the damage that Trump’s tariffs will do to the American economy.
Meanwhile, Sitaraman and Meyer argue that the WTO and NAFTA really do need deep reform, as Trump argues. In language that’s almost Trumpian, they advise the U.S. to use hardball tactics both within these deals and institutions to reform them, and outside them to propose new trade regimes entirely. A willingness to “remake institutions through tough, innovative negotiations is the only way to achieve a trade policy that works for all Americans,” they say.
More broadly, Scott, Baker and others agree with Trump that the U.S. trade deficit is harmful and should be brought down.
Clearly, many progressive economists agree with Trump as to the general nature of America’s trade problem. Some even agree on some solutions.
But they still disagree on a whole lot more.
Scott, for instance, argues that Trump’s tariffs lack any broader strategy. He notes historical examples like the Reagan administration, which used the threat of tariffs to convince trading partners to systemically reduce the value of the U.S. dollar and close the trade deficit. He also listed a wealth of policy options, such as countervailing currency intervention, that the Trump White House simply hasn’t mentioned. Even Trump’s steel and aluminum tariffs “are a tremendous missed opportunity to assemble a coordinated plan designed to reduce overcapacity in steel and aluminum.”
Meanwhile, Boushey, Tucker, and Gallagher all suggest focusing on domestic policy to undo the damage from trade: stronger unions, a higher minimum wage, a strengthened welfare state, and a sweeping increase in U.S. industrial policy. Trump seems utterly disinterested in such things.
Baker sees many existing licensing and intellectual property laws — which Trump is defending — as culprits in protecting America’s professional upper class from the same global competition that has confronted blue-collar workers. And Friedman said he’d prefer a big push for domestic public investment in the U.S., combined with a broad effort to get international capital flows under control.
Needless to say, this is all a muscular vision of progressive fiscal, regulatory, and labor policy that would be utterly anathema to Trump’s Republican Party.
“We invented the wheel with the New Deal that put tight reins on financial speculation, provided health care, enabled collective bargaining so that workers gained their share of profits, and created a trading system that prioritized global trade while allowing for nation states to deploy policies for employment and prosperity,” Gallagher wrote.
“In that sense, what the U.S. economy needs is a return to those very sensible roots.”
